Kinetik Holdings Inc

6. EQUITY METHOD INVESTMENTS

As of September 30, 2024, the Company owned investments in the following long-haul pipeline entities in the Permian Basin. These investments were accounted for using the equity method of accounting. For each EMI pipeline entity, the Company has the ability to exercise significant influence based on certain governance provisions and its participation in the significant activities and decisions that impact the management and economic performance of the EMI pipeline. The table below presents the ownership percentages and investment balances held by the Company for each entity:

(1)Investment balance is primarily comprised of the additional 12.5% interest that was acquired during July 2024.

(2)The Company owned 16% of GCX as of December 31, 2023 and divested entire ownership in June 2024.

During the quarter, the Company entered into an Equity Sale and Purchase Agreement with third parties to purchase a 12.5% equity interest in EPIC, increasing our total equity interest in EPIC to 27.5%. As the increase in ownership did not result in a controlling interest, and did not represent the funding of prior losses, the Company resumed accounting for its investment in EPIC using the equity method of accounting upon the closing of the acquisition of the additional interests during July 2024.

On June 4, 2024, the Company consummated the previously announced transaction contemplated by the Purchase and Sale Agreement dated as of May 9, 2024, to sell its 16% equity interest in GCX to GCX Pipeline, LLC (the "GCX Buyer") for an adjusted price of $524.4 million (the "GCX Sale"), including a $30.0 million earn out in cash upon the approval by the GCX Board of Directors of one or more capital projects that achieve certain capacity expansion criteria. The Company recognized a net gain of $89.8 million for the nine months ended September 30, 2024 in relation to this transaction.

The unamortized basis differences included in the EMI pipeline balances were $365.7 million and $349.3 million as of September 30, 2024 and December 31, 2023, respectively. These amounts represent differences in the Company’s contributions to date and the Company’s underlying equity in the separate net assets within the financial statements of the respective entities. Unamortized basis differences will be amortized or accreted into equity income of unconsolidated affiliates over the useful lives of the underlying pipeline assets. There was capitalized interest of $24.1 million and $24.7 million as of September 30, 2024 and December 31, 2023, respectively. Capitalized interest is amortized on a straight-line basis into equity income of unconsolidated affiliates.

The following table presents the activity in the Company’s EMIs for the nine months ended September 30, 2024:

(1)Distributions consisted of distributions from a return on investment of $223.7 million, which was included in cash flows from operating activities and distributions from a return of investment of $2.8 million, which was included in cash flows from investing activities.

(2)For the nine months ended September 30, 2024, net of amortization and accretion of basis differences and capitalized interests, which represents undistributed earnings, the amortization was $5.9 million from PHP, $0.5 million from Breviloba, LLC, $2.7 million from GCX and accretion of $1.6 million from EPIC.

Summarized Financial Information

The following table represents selected data for the Company’s ongoing EMI pipelines (on a 100 percent basis) for the three and nine months ended September 30, 2024 and 2023.